The company for the last six months has competed against big payment processors and merchants acquirers like Bank of America, First Data and Chase Paymentech. But instead of trying to compete on lower fees, it supplies data analytics, marketing and loyalty services that are built off credit card swipe transactions. This gives merchants valuable tools to break down sales trends, better identify their best customers and reach out to loyal or lapsed customers through email marketing and retention tools.

In the six months since Swipely moved to this model of combining payments, analytics and marketing, it has processed $250 million in payment volume. That’s a drop in the bucket compared to big competitors. But the solid growth shows that Swipely may be on to a business model that works. And now the company is expanding its offering for its merchants to help them get even more insights and forge a better relationship with their customers.

With Swipely Winter ’13 update, Swipely is now able to provide spending data on individual users, so a merchant can see what its top users are doing in real-time and cater to their needs. Previously, Swipely offered trend and aggregate spending data, but now it can provide a CRM tool complete with customer profiles for merchants.

Swipely is also offering next-day settlement through a partnership with American Express. Merchants can use Swipely’s newly tablet-optimized dashboard to receive more detailed sales data, such as hourly sales trends, multiple location information and daily sales reports that include social media interactions. And Swipely is opening up its service to 20 more point of sale systems.

Davis said Swipely is now where it needs to be, competing in the massive $70 billion payments market. He said the landscape for pure loyalty startups is bleak, something Google also seemed to acknowledge with the recent closure of Punchd. By bundling in payments, Swipely can displace an existing cost for merchants and replace it with free marketing and analytics tools for businesses. He said most businesses are not getting any real data insights from their payment processor.

“We give merchants the ability to understand their sales data. You can now understand your customers in ways you couldn’t before,” said Swipely. “We’re bringing analytics to Main Street.”

What makes Swipely attractive is that the company matches whatever fees that a previous payment processor offered so there’s no added cost to try it out. And it works with most existing hardware so it doesn’t require any new point of sale upgrades.

Davis said the company only has a few hundred customers, who are doing an average of $1 million in annual card transactions. But he expects his customer base to skyrocket in 2013 as merchants learn about the service and he’s quadrupling his sales team to handle the demand.

I think Swipely made a smart move in finding the right fit for its card swiping technology. Many merchants are still struggling to better understand their customers and could use the tools Swipely offers. Some mobile payment services like Square offer simple analytics, but they don’t always appeal to bigger merchants who have sunk a lot of money into existing hardware.

Swipely, which has raised $8.5 million to date, also works with some mobile point-of-sale applications like Lavu POS. The product shows that the credit card is still valuable to merchants and consumers even with the rise of mobile payments. Despite a bunch of iterations, Swipely may have finally found an approach that sticks.